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tv   Bloomberg Bottom Line  Bloomberg  July 23, 2014 2:00pm-3:01pm EDT

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>> from bloomberg world headquarters in new york, i'm mark crumpton. this is "bottom line." today, israel says its gaza campaign will continue as u.s. secretary of state john kerry works on the cease-fire. remains of malaysian airlines crash victims arrive in the netherlands. a look at how technology is changing the trucking industry. >> to our viewers in the united states, and to those of you are on the world, welcome. we have full coverage of the stocks and stories making
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headlines today. we look at the fight over u.s. school lunches. matt miller looks at why gm is firing on all wonders despite the recalls. we begin with elliott gotkine in tel aviv on the latest gaza. another day of intense diplomacy on the part of john kerry. he has a meeting with palestinian president mahmoud abbas, and has also met with benjamin netanyahu. if you are hoping that this would mean we have an imminent cease-fire, i'm afraid that is a little optimistic. is talking minister about more serious steps in gaza , likely to be taken with these titles that the militants use to get into gaza have been destroyed. israel is like -- unlikely to be deterred by a human human rights council putting together a commission looking into alleged war crimes on the part of israel. airlines are canceling
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flights to and from tel aviv. what did officials tell you? >> a couple of things. first of all, cancellations are at about 25%. you may have also noticed, shares spiked higher by five percent. the reason is investors are hoping they may get a boost because people cannot fly with any other major airline right now. about 31 canceled flights today. they said to me that the boost to revenue from other airlines not being able to fly to and from israel will be millions, not tens of millions. certainly not enough to make up for the $50 million and expect to lose in the third quarter as a result of the fighting in gaza. >> you did some traveling today, visiting some companies in the southern region. what did you see in the trip? business as usual but
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these are unusual times. four point five kilometers from gaza, you could see looms of smoke billowing out of buildings, and you can hear artillery fire. they had a sleepless night because of the artillery, not because of the air raids, but producing. however, about 25% of their employees are not coming in. another area, five miles north, there were three sirens there. domean hear the iron missile being fired. when they sound, you have 15 seconds to make it to one of the hasters that this company dotted around the campus, ,osting them about $300,000 just on bomb shelters. >> thank you.
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the decision to implement no-fly zones over ukraine and israel require classified intelligence and keen political insight. a group at the faa is responsible for providing this analysis to help identifying public. our cat reporter alan levin is with me from washington. describe to me this balancing act at the faa? simple flight a safety decision, it would be relatively simple but you have questions of diplomacy, other u.s. agencies like the state department, department of defense, that need to be notified up to and including the white house as well. cases, it ends up being a pretty difficult balancing act. when the alluded to,
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faa makes a decision like this, it does not do so in a vacuum. talk about the maze of government agencies at the faa has to navigate. said, if the military is involved, as we have seen in prior years in iraq and afghanistan, the faa has to work .ith the department of defense any time they are dealing with issues overseas, they are working with the state department to make sure they do nations' any foreign feathers. they are working with intelligence agencies. an awful lot of this can -- they cannot discuss. clearly, a lot of consultation and work that goes into one of these orders. >> what about the competing interests, politics versus safety? to difficult is that naked reach a consensus of one to fly or not?
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example, thatr there have been some cases where faa may have wanted to ban .lights over an area the evidence was not strong as they would have liked, so they settled on a compromise where they would allow flights at higher altitudes over the area, they issued a strong warning to airlines but continue to allow flights. we see that now, for example, in syria, where there has been a civil war raging for years. afghanistan. the u.s. faa is allowing u.s. carriers to fly over those areas. >> alan levin, thank you so much. the bodies and remains of the victims of malaysian flight mh 17 have arrived in the netherlands. the king, the queen, and the
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prime minister joined the victim's relatives at the airport. ryan chilcote is on the phone from london. we are hearing reports that the remains of many people are still unaccounted for. from one group of international observers today that said they were told those trained result saw leave the station a couple of days back at the crash site contained 260 bodies which would leave 38 people unaccounted for. because were told that they were not allowed to verify themselves. international observers did not count the bodies at the site, so they cannot be sure. we also have some disturbing reports that there are still some remains actually lying on the ground at the crash site. you heard the australian prime minister say today he is concerned if more pressure is not put on the russian president to provide access to the crash site, those are made may never make it back. >> two ukrainian fighter jets
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were shot down today. you were talking about president bruton, does this put pressure on him? >> if for no other reason, the optics do not look good here there is supposed to be a de-escalation, not an escalation of fighter jets being shot down. at a technical sense, those planes were flying at. altitude, the greater the likelihood sophisticated technology was involved which could only have come from russia. that means more pressure on putin to curb the flow. planes that were shot down today were at about 15,000 feet, which is about half the altitude that mh 17 was flying at. nonetheless, pretty high, and naturally, people will be looking to see if the weapons that brought them down came from russia or if they possibly came from ukrainian stock which were raided a few weeks back.
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>> european union ministers met yesterday, there were talks of sanctions targeting specific russian citizens and companies. what can you tell us? >> the upshot of yesterday's meeting was that they really did nothing yet, but they agreed to do something. there is no real good mathematical way to do this, but i would estimate they have about a third of what the u.s. have done. based on what they said, they intend to close the gap over the next few weeks. 28 countries involved. their vested interest when it comes to russia, are much greater than the u.s., which has a smaller economic interest. relatively speaking, that's progress. >> ryan, thank you. coming up, the crisis in the middle east. we will take a closer look at the sunni insurgency in iraq, and efforts for cease-fire in the israeli-palestinian
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conflict. stay with us. "bottom line" continues in just a moment. ♪
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in the now on the crisis middle east. the iraqi parliament postponed a vote or new president by one day as the sunni insurgency intensified. is the me from toronto vice president of middle eastern and south eastern affairs at struck for. co-author ofe "political islam in the age of democratization." thank you for your time today. the discussion today in washington on capitol hill centered on that expanding sunni insurgency in iraq. fueling this expansion and what, if anything, is being done to stop it? obviously isgency being led by the group that called themselves islamic state.
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these to call themselves the islamic state of iraqi in syria theirclare reestablishment of a kayla fay. they cannotve done do alone. they have support from a disenfranchised sunni population in iraq. indigenous iraqi groups are supporting isis. what is being done can be summed up on a number of levels. the u.s. is trying to beef up the iraqi security forces capability. iran is helping the government in baghdad. we have the shiite militias thelizing and engaging sunni militias. there is a lot going on. we have turkish, c as well. affect is this
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insurgency having on the economic structure of the water middle east -- wider middle east? >> obviously, it affects the markets as iraq is an oil-producing country. the fear is how does this impact oil production from the south, controlled by the shiites, and then from the north, controlled by the kurds? with regard to the northern fields, we have the dispute between baghdad and the kurdish authorities in the north that is already disrupt and the flow of oil and we see kurdish authorities tried to work with turkey to be able to sell their oil and be paid for it. on top of that, you have this violence. that sends the markets wondering what will happen. will this crisis expand, will be islamic state be able to be in shiite areas? with the vice
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president of middle eastern and south eastern affairs at sr tratfor. prime minister nouri al-maliki won the most seats in the april parliament reelections. what is the consensus if he is chosen to form a new government? can you direct continue under his leadership? >> we are at a point where al-maliki, even among his allies , has become a liability. the kurds do not want to see him continue in office. the sunnis definitely want him out. what we have published at strat for this morning was this new development of a potential displacement for malik he. there is a lot of bargaining going on amongst the shiites and between the kurds and sunnis, to
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reach a consensus. >> let's take a look at that situation in gaza. egypt has put forward an unconditional cease-fire proposal. that opera has the backing of israel and the united states. wantsmas says it guarantees on lifting border blockades first. is there anyway around this impasse? on how theepends military situation plays itself out. we are not really sure whether israel is interested in an immediate cease-fire. it's not clear to me. then hamas thinks if it can continue the battle, it can put pressure on israel, especially with the civilian casualties in gaza mounting. so both sides are still focused on the battlefield and i do not think there is that focus on the negotiating table, one that would lead to a truce immediately. outlawed the muslim
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brotherhood, which has links to hamas. even interested in what egypt had to say because of that ? >> it may not be interested, may want to resist cairo and its footprint in gaza, and for this reason it is trying to bring in countries like qatar and turkey as a counterweight to egypt, but at the end of the day, gaza is that george egypt, and there is no escaping that. hamas realizes that, but at the end of the day, they understand they have to work with egypt. there are realizes mutual suspicions. >> one of the stories we have been following today, the flight plan -- danny into and out of tel aviv.
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willie international community now think twice about doing business in the region? becomen't think it has that severe but definitely from the point of view of the israeli government, this is a concern. it does not want to have the sort of flight ban continued for long. right now we have 24 hours and then an additional increment. it is wait-and-see. see theould like to resumption of normal air traffic as soon as possible. a widerthere is implication just yet, but definitely for israel it's a cause of concern. they want to be able to prove the rocket that came close to the airport was a fluke, not something that will become the rule down the line. >> thank you for your time and expertise. we appreciate it. >> thank you for having me.
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>> general motors is facing an unprecedented recall scandal but customers and investors are apparently unfazed. we will take a look at what is driving growth, when "bottom line" continues. ♪
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>> general motors has recalled more than 25 million cars this year including another one today. six vehicles covering more than 700,000 cars. yet, analysts expect sales to rise at a healthy pace in the second quarter. part of the success is their willingness to finance high-margin suvs at zero percent. how is all of his going to affect the carmaker's bottom line? matt miller has a preview. it seems counterintuitive. >> all these recalls and yet
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they are selling like absolute hotcakes. part of the reason is they are just building vehicles that are so much better in terms of quality, in terms of consumer acceptance, then they were 10 years ago. >> so it's not necessarily about a forgiving public. >> in a perverse way, the recalls have helped them. car that you purchased from general motors 10 years ago and it is being recalled, you have to go to the dealership, and 10 years down the road, you may have the ability to purchase another vehicle. you are there and looking at the product. it gives dealers a chance to bring consumers in and say look at what we have now. instead of fixing this cobalt, why don't we put you in a nice new corvette? a lot of times you will say, yes, please, especially with the run working technology in that vehicle -- groundbreaking technology in that vehicle.
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they are selling so many high-margin vehicles. ,hey sell the high-margin suvs the tosco, uconn, this is a class that almost no one else cares about now. >> is for taking advantage of this? >> not of the big suv class. they have all but dropped out of it. they still have the expedition and the lincoln navigator but they have not had a successful redesign in 10 years. what ford is doing now will give them a huge advantage down the road, and that is in the pickup truck . they have unveiled the new aluminum pickup truck. yet,are not selling it switching over in the factory to build that, but it's putting pressure on other carmakers, including gm, to start to pick up their pickup game. ford also reports tomorrow.
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you will see a lot of expenditures on producing this new aluminum to cut. >> no doubt we will hear from you tomorrow as those numbers come out. 26 past the hour, that means bloomberg is on the markets. julie hyman is standing by. whereyou take a look at stocks are trading, we have the s&p 500 at a record echoes of a couple of strong earnings reports. tech and health care doing well. boeing, however, pulling down the down right now. take a look at a couple of other individual stock we are also watching related to earnings. juniper is on the way down. falling the most in over three years after it forecast a recorder results that will miss analyst estimates. the company is blaming low equipment purchases and struggled to sell smaller gear to corporations. biogen, on the flip side, doing well. they are raising their full-year forecast that sales of its new
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multiple sclerosis treatment more than tripled from a year earlier. we will be back on the markets in 30 minutes. more "bottom line" is next. ♪
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>> welcome back to the second half-hour of "bottom line." i'm mark crumpton. adc server court ruling yesterday spilled of a worst-case scenario for insurers and supporters of the affordable care act. putting subsidies for nearly 5 million americans on the chopping block. hours later, another court had the opposite ruling. if the split decision told, it could lead to another landmark u.s. supreme court case. washington correspondent megan hughes is with us now on the latest of a showdown. when does it mean if the d.c. decision holds? >> it could have huge
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implications and could cut off financial help or anyone using the financial marketplace which we know as 36 states decided not to establish their own marketplaces, so in those states , that translates to 4.7 million people this year who are expecting subsidies. that is estimated to be up to 14 million people by 2017. the vast majority of those signing up on, 87%, are expecting some sort of subsidy. one thing administration officials stress is there will be no affect on those tax credits, but again, we are in legal limbo. >> who is losing and how much? rulinghis d.c. court stands in terms of income, $46,000 aning around year, $95,000 for a family of four, that is who is eligible for a subsidy.
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the cd estimates that this will cost over a trillion dollars over a decade. -- that numberr would go down if this decision is upheld. insurers would larger be stuck with the sickest and most desperate customers and this would have the potential to append that very into -- important insurance pool. >> what is the next that in a legal battle? d.c.e white house hopes to decision will be reviewed by the full panel. yesterday's decision was just a 2-1 decision. if that does not happen, the rse,t does not reserve cou you have these previous decisions in the lower courts. that is when the supreme court could step in. that process could take up to a year. the other option would be a legislative fix. but in the current congress,
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that is very unlikely. thank you. staying in washington, a bumper crop as commodity prices plunging, in some cases could trigger federal farm subsidies. with the heading group.u.s. farmers did he say anything about farmers getting more money? thatis is something supporters and opponents have been watching closely. how are these new programs going to play out? the last farm bill was made at a time of high prices and now it is low. $3.70 today. that is touching four year lows. thecently was speaking with president of the american farm bureau federation. that is the largest u.s. farmer group. here's what he had to say. >> there are a lot of people that are not expecting koran to trigger that on a year-to-year
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basis. other products that may trigger the price, but not to any great extent, and then the projections for peanuts indicate the trigger will hit and there will be substantial payments going out. >> there could be subsidies paid out for peanuts. if he gets to be more pricey than that, then it could run into the billions of dollars. right now, corn, soybeans are strong enough that that list this year we will not see those triggers being pulled. >> you mentioned this year. what is the longer-term outlook? >> and that's the interesting question. as surpluses accumulate, as farmers have good crop years, surpluses start piling up in grain bins and that depresses global markets. interestingly, the situation in ukraine has helped u.s. farmers because they are big horn and wheat exporters. the unrest there has helped to prop up commodity markets a bit.
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you go from an environment of top supplies that are really tight, to surplus supplies. that is when a taxpayer bill start to increase. spoke to mr. stallman about the government and what he expects to publish this year. what are the farmers main issues? of concern especially in western states where you have labor-intensive crops, they want to see immigration reform. also a lot of filling the tax reform should be on the agenda. issues with water rights and the epa. speaking with mr. stallman, he was not optimistic. this is about halfway through the growing season and we are half with good harvest year but the congressional legislative year is basically coming to an end. once you get the august recess, you end up with a long break, people looking at the elections, unless it is a big deal that
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affects their elections, they will not be looking at these issues. farm issues are not a key issue in many districts. >> thank you. let's stay on topic. just a few years ago, school lunches in the u.s. got a healthy makeover with the help of michelle obama. but these days the organization of lunch ladies who were first who were ladies -- allies of the first lady, are now shifting. 11 point $6 billion. that is the price tag for the national school lunch program and the healthier standards are taking a bite out of the sails of companies like conagra, pepsico, and domino's pizza, who spent millions on food industry lobbying and who all happen to be members of the school nutrition association, the same organization that once worked with the white house to get
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those rules passed. they are now siding with house republicans to roll them back. it goes without saying, michelle obama is perp next by the change, but she has her suspicions and went on the offensive at last friday's state dinner. >> it is not surprising that there are certain interest that are resisting change and trying to take us back to the old ways of doing business, because for them, there is a lot of money on the line. food industry influence is one theory. are that fruit and protein prices are rising. schools are losing money. and simply, kids do not like the healthier food and it's all going to waste. so far the battle has mostly been between the house of representatives and the white house but the senate is now holding a hearing in agriculture committee. they say the rules can't afford to be relaxed for they are real
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reject -- reauthorized next year. >> we will continue to encourage them to make the healthy choice and make the healthy choice the easy choice, but operators need some flexibility in order to pressure all of their students participate in the program. schoolar it seems the nutrition association is making strides here. a provision in a bill would allow some schools to opt out of the standard. $105,000 in three months is paying off. food fight to be continued. >> thank you. argentine debt negotiators meeting in new york today. " will have the latest when bottom line" continues. ♪
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>> it is time for today's latin american report. argentina could do fault on
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bonds maturing in 2033 in the country does not reach a settlement with its creditors. this latest ruling by the u.s. district judge here in argentina's case, tell us about it. argentina has been locked in a long-term court battle with a group of hedge funds led by paul singer. yesterday in a court room in ordertan, judge thomas the parties to engage in continuous the negotiation's with acorn -- court appointed mediator in an effort to avoid a default that could come next wednesday. >> will this be the first time authorities talk with the media? had met separately with the court appointed mediator. a new york lawyer.
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they have not negotiated together as far as anyone knows. that is what will be necessary to avert this potential disaster next week. what argentina has been saying, what is this talk that they cannot abide by the judge's orders? >> a judge ruled that argentina cannot pay on its performance 1.5 billiont pays dollars to the holders of .efaulted bonds argentina claims if they pay the one point $5 billion, there will be a raft of planes coming in after it, up to $20 billion from other holdout creditors. inalso claims that a clause the structured bonds could potentially give holders of the restructured debt the right to
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andm full payment if nml that group gets full payment of their bonds. >> so what do the creditors say? >> they say the clause does not apply. in any case, by its terms, it expires by the end of the year. if there were some agreement to push this past december 31, the clause would not apply. potentially, away out of the situation could be found. >> we are talking about a deadline of a week from today when argentina could intentionally default. is there any possibility that this deadline is going to be extended? >> it can only be tended it argentina come to some sort of agreement. the parties could agree to go to the judge and ask him to suspend operation of his rulings to give them time to negotiate.
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argentina says it's impossible to get the deal done by the end of the week. the most likely thing would be for them to try to get more time and wrap up some negotiations. >> are we talking about round-the-clock negotiations? >> the judge ordered them to meet with the mediator. they were supposed to meet at 10:00 today. argentina let him know that they were not going to be able to make it, would not get to new the firstme, and session is scheduled for tomorrow at noon. >> what can we expect next week? argentina will come to some sort of accommodation with its creditors, or it will default. this is a high-stakes game of chicken that we will be watching. >> if there is a default, what is the ripple effect, especially
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for emerging markets? bethe ripple effects would disastrous for argentina, its economy extending their current recession, keeping it out of the capital markets for many more years after its original default on $95 billion in 2001. >> he has been following the story and no doubt a busy week ahead. thank you. , the wiring of the world continues. at a new vehicle to vehicle communications system that has the potential to transform the trucking industry. can it improve safety while cutting cost? ♪
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>> connected technology is poised to transform the trucking industry. a startup is leading the way.
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we visited the companies's office in silicon valley to find out more. >> trucking is the lifeblood of the u.s. economy. if you bought it, a truck brought it. everything we use is pretty much brought by trucks. we are developing a system to improve safety and efficiency of trucks by using advanced sensing and communication. you can think of it like cruise control in your car in that we control the gas and brake but we trucks using a direct communication link. as the driver of the rear truck, you are steering. the driver in front is as well. --se are not animated automated. are just adding to the abilities. on the front is a radar sensor --the front which the tax
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detects anything and can apply the brakes. ae radar can see farther than human driver can see, and it does it every time. a human driver takes one to two seconds to react to what is in front of you. we can do it in 100th of a second. inside we try to change the driver's experience as little as possible. we have a video display on the windshield that shows you the view from the other truck, control to engage and disengage the system, but fundamentally you are just driving. fuel is the biggest expense for fleets, about 40% of the operating expense for a typical fleet. these trucks spend about $100,000 a year on diesel fuel. the efficiency comes from the fact that we can safely put the trucks closer together than what is safe when you are manually driving, and so from aerodynamics, we save fuel on both.
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we have tested the system, have driven over 10,000 miles so far in our prototype trucks in formation. the first large-scale deployment will be next year in 2015. that is when you'll start to see a lot of these trucks out on the road. stay with us. we will have another check on the market movers on the other side of the bridge. "bottom line" continues in just a moment. ♪
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>> get the latest headlines from the top of the hour on bloomberg radio and streaming on your tablet on thanks for joining us. on the markets is next. it is 56 past the hour which means bloomberg television is on the markets. let's take a look at where stocks are trading one hour before the closing bell. at a record,rading the dow being pulled lower by boeing. the nasdaq higher on apple among others. if you look at the treasury market, a mixed teacher there as well. some selling on long end of the
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curve rushing the 10 year yield down to 2.46% -- i should say, up little bit today. still, relatively low levels. sticking of the bond market, there is a new trend. green bonds. 20 billion dollars of these environmentally friendly bonds have been issued. this morning, alix steel spoke head of green bonds and zürich insurance. she asked what defined green bonds? >> a bond in which the use of for a climatesed friendly agenda, mitigate climate change, if you will. there are several types of green bonds. , which you have mentioned, the road has been largest in that space. have asset backed bonds, revenue -- thatissued debt and i use
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to fund a project. that is really what we're talking about. standard bond a documentation, but within that there will be a special demarcation for the use of proceeds that will define the climate friendly agenda. >> which is different from an asset backed bond which is back i cash flow. your investor will take the risk of the project. in a proceeds bond, it it is the credit risk. >> why do you like them? >> green bonds is a fantastic opportunity to do well, and to generate good returns, but at the same time, doing good. having a tangible impact on the environment. let me give you an example. fundingt that the seeds --receives one thing funding, in mexico, to replace
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up to 2 million old and inefficient appliances, refrigerator units, 45 million light bulbs. over the lifetime of this project, 3.3 million tons of co2 emissions will be avoided. carsis like taking 300,000 off the streets for a year. that is what responsible investment is about. >> you like the headline but you still have to make money. how does this compare to a corporate bond, do you get a higher yield? what is the real upside financially? bonds, we want to see the priced on the curve of issuer. so far that is what we have seen. we are getting compensated for the risk we are taking and that is what we are asking. >> compared to corporate bonds, do you get a higher yield, is it comparable? >> you have to compare it to a similar bond by the same issuer, and it's absolutely comparable.
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>> how do you know that this stuff is actually green? toyota came out and issued some green bonds but the money actually came from 30 cars and made its way to green cars. that has created a little bit of controversy. it, what think about toyota did was a fantastic transaction. they have committed to the to beds of that sale channeled to financing and and otherius' energy-efficient vehicles. that is the idea, to create leadership in the space. >> that is it for on the markets. "street smart" is next. mostllo and welcome to the important hour of the session. another record day on wall street. the s&p 500


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